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Bank of Japan, in a Surprise, Adopts Negative Interest Rate

nytimes.com

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Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#221

Post by ArkyBeagle »

jernfrost wrote: post #109
HSO wrote: post #86

Those who think Japan is unique in its condition and/or that the answer to its problems is more of the same old "advice" as proffered by standard issue economists and business types might profit from Robert Gordon's recently published "American Growth". (paper version: http://www.nber.org/papers/w18315.pdf ) At least, it can offer a different, longer-term perspective on the issues. It's not impossible that we will lo…

But the growth problems of Japan is largely an illusion and myth caused by population decline. Growth per capita in Japan has been completely normal in the supposed terrible years. It is the population decline which causes the overall GDP growth to look anemic. Naturally it is growth per capita which matters as this is what improves the living conditions of people. There are many countries with high GDP growth but wh…

Population decline is here or in the near future, depending on where you stand on the planet.

Overall GDP growth is needed because it's the fundamental assumption behind both government and private debt.

The US has both had population growth and anemic growth since 2008. So it's not all population bust.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#222

Post by ArkyBeagle »

Cthulhu_ wrote: post #56
dzdt wrote: post #44

The backstory here is demographics. Japan has a shrinking, aging population and almost no immigration. With fewer people there are naturally less things bought, sold, and produced. Japanese authorities have been trying to pump the economy by deficit spending (central government borrows money and spends it), quantitative easing (central bank buys long term private debt, increasing the money supply for short term spend…

Wouldn't it be acceptable to just accept a shrinking economy and change policies in such a way to deal with it? i.e. shrink the police and armed forces, public services, cut needless spending, etc. Become more frugal as economy allows.

In general, it would not be acceptable. "A shrinking economy" can be interpreted as deflationary, and deflation destabilizes regimes in favor of something akin to "strong man" dictatorships. See the interwar period in the 20th century for details.

If you swing the value of holding just currency to where it grows relative to goods without doing anything, then people won't do anything. This spirals. Since nothing is being done, there's no work. You might have a black/grey market economy spring up but don't tell anybody about it.

Specific to Japan, I am not sure. Depends on whether the demographic slack is permanent or temporary.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#223

Post by ArkyBeagle »

laotzu wrote: post #97
HSO wrote: post #86

Those who think Japan is unique in its condition and/or that the answer to its problems is more of the same old "advice" as proffered by standard issue economists and business types might profit from Robert Gordon's recently published "American Growth". (paper version: http://www.nber.org/papers/w18315.pdf ) At least, it can offer a different, longer-term perspective on the issues. It's not impossible that we will lo…

Growth for the sake of growth is cancer

A society without growth looks like Mandarin China. You want growth for the sake of people, to provide a rising standard of living.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#224

Post by hackuser »

outside1234 wrote: post #203
hackuser wrote: post #178

Earlier quoted context omitted.

> I think it comes too close to taxing assets for the rich to embrace it. What's wrong with taxing assets (wealth)? I don't know the full economic implications, but I think it may be more fair than taxing income. Wealth is a much better measure of a person's financial strength. Consider: * Because we tax income, a person with $1 billion in assets who makes $100,000 pays less tax than a person with $0 assets and makes…

So, in essence, we punish responsible people who save for retirement. No thanks. Also, one unintended consequence of this policy would be that the MINIMUM interest rate you would have to pay would be 3.75% because below that it makes more sense to just buy a gold bar and bury it in the backyard vs. lend it out. Basically, the way you can imagine the impact of that is that your mortgage interest would (today) essentia…

> the MINIMUM interest rate you would have to pay would be 3.75% because below that it makes more sense to just buy a gold bar and bury it in the backyard vs. lend it out.

I don't quite follow. I have to pay a tax of 3.75% of the gold bar's value whether I keep it or lend it. Even if I only can lend it at 2%, that's still better than nothing.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#225

Post by clock_tower »

tamana wrote: post #199
madhermit wrote: post #187

Earlier quoted context omitted.

I concur with your description of the symptoms and your desired outcome. However, the current state of affairs has less to do with capitalism in general and more to do with the western world's addiction to short term results resulting from subscribing to Keynesian economic theory.

What does keynsiean theory have to do with building low quality goods?

I think there's a Keynsian economist who denies that the broken-window fallacy is a fallacy -- who believes that it's better to have to build and continually replace shoddy goods. Does anyone know the details on this?

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#226

Post by clock_tower »

djsumdog wrote: post #172
laotzu wrote: post #97

Earlier quoted context omitted.

Growth for the sake of growth is cancer

Exactly, you cannot have infinite growth. Consumerism and planned obsolescence depend on ever expanding growth. Why can't we just have...enough? Why don't we create things that last decades instead of years? We can scale down, consume less, pollute less. We could have fewer factories that produce higher quality products. We could pay people more. We could have a minimum income so we'd get more art and entertainment i…

I'd also recommend Byron Tully's _The Old Money Book_; its main advice is to have _enough_, to buy things that last decades instead of years, to scale down, consume less, pollute less... In short, I think you'll agree with what it's saying.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#227

Post by schoen »

clock_tower wrote: post #225
tamana wrote: post #199

Earlier quoted context omitted.

What does keynsiean theory have to do with building low quality goods?

I think there's a Keynsian economist who denies that the broken-window fallacy is a fallacy -- who believes that it's better to have to build and continually replace shoddy goods. Does anyone know the details on this?

There's Keynes himself on generating employment by burying money in the ground.

https://en.wikipedia.org/wiki/The_General_Theory_of_Employme...

I'm not sure if that example is exactly equivalent to breaking windows and paying people to fix them (for example, maybe it matters a great deal for his view that it's the government which is paying for the demand stimulus).

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#228

Post by clock_tower »

ArkyBeagle wrote: post #223
laotzu wrote: post #97

Earlier quoted context omitted.

Growth for the sake of growth is cancer

A society without growth looks like Mandarin China. You want growth for the sake of people, to provide a rising standard of living.

The average fortune is dissipated in three generations. (The average medieval noble family was back to being commoners in three generations; and the average Chinese noble family... well, Chinese noble titles degraded by one rank every generation, and every generation had to pass the imperial examinations to get a lucrative government job, so there was a _lot_ of churn there.)

Even without growth, you have a lot of social mobility -- downwards as well as upwards.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#229

Post by clock_tower »

marvin wrote: post #106
HSO wrote: post #86

Those who think Japan is unique in its condition and/or that the answer to its problems is more of the same old "advice" as proffered by standard issue economists and business types might profit from Robert Gordon's recently published "American Growth". (paper version: http://www.nber.org/papers/w18315.pdf ) At least, it can offer a different, longer-term perspective on the issues. It's not impossible that we will lo…

Do we agree on what "growth" means in this instance? Is is possible to have increased leisure/increased standard of living/increased health/decreasing cost of living over time, without having an incerase in GDP and an average positive return on capital? Or do we give up the expectancy of a better life for everyone if we give up economic growth as we know it?

> Is is possible to have increased leisure/increased standard of living/increased health/decreasing cost of living over time, without having an incerase in GDP and an average positive return on capital?

My guess is a very emphatic yes. GDP goes up in a traffic jam; there's such a thing as "bad GDP" as well as "good GDP".

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#230

Post by clock_tower »

schoen wrote: post #227
clock_tower wrote: post #225

Earlier quoted context omitted.

I think there's a Keynsian economist who denies that the broken-window fallacy is a fallacy -- who believes that it's better to have to build and continually replace shoddy goods. Does anyone know the details on this?

There's Keynes himself on generating employment by burying money in the ground. https://en.wikipedia.org/wiki/The_General_Theory_of_Employme... I'm not sure if that example is exactly equivalent to breaking windows and paying people to fix them (for example, maybe it matters a great deal for his view that it's the government which is paying for the demand stimulus).

Found it: it's Paul Krugman who advocates for this -- at least if this link (disclaimer: just skimmed the article, didn't check it or its context for their political views) is accurate: http://www.economicpolicyjournal.com/2013/12/lol-more-proble...
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